We have not checked the charts of JD.com (JD) since July 10 where we wrote that "JD shares are a bit extended so a sideways correction or even a shallow dip should not come as a big surprise. Traders could use a dip or a sideways correction to be a buyer of JD. Risk a close below $59 while looking for gains to the $86 area."
Let's review the charts again.
In this updated daily bar chart of JD, below, we can see that our advice in early July wasn't bad. Prices did correct until the middle of August. Our stop was not elected and prices reached the $86 area in early September. Prices have obviously continued higher but a shift has been underway from November.
The On-Balance-Volume (OBV) line made a peak in November and has slowly weakened. A falling OBV line tells us that sellers of JD are more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator made a lower high in November even though prices made a higher high. This is a bearish divergence and a "heads up" to pay closer attention to the price action. Divergences are obviously not hard and fast signals to sell or buy.
In this weekly Japanese candlestick chart of JD, below, we can see a picture that is less than bullish. Prices are still above the rising 40-week moving average line but the line could get tested in the weeks ahead. The OBV line shows a peak in early November telling us that sellers of JD have been modestly more aggressive the past four months.
The 12-week price momentum study shows lower highs from the summer even though prices moved higher. This is a bearish divergence and tells us that the pace of the advance has been slowing. An advance can slow for various reasons but I tend to think that longer-term investors have been scale-up sellers. They may have bought JD at $20 and are very content for a five-bagger.
In this daily Point and Figure chart of JD, below, we can see a potential downside price target in the $73 area. A trade at $99.37 would probably turn this chart bullish.
In this weekly Point and Figure chart of JD, below, we can see a more bearish price target of $64.
Bottom line strategy: JD was trading higher on a Q4 earnings beat, according to media reports. The $85-$80 area seems to be pretty good support but the bearish divergence from the weekly OBV line tells me to not rush to be a buyer.
